If you started your business by leasing a space, you’re in the majority. New business owners often lease because they are not sure how fast they’ll grow and aren’t ready to commit to owning. But perhaps now you have a proven business model, an expiring lease, and a desire to invest in your own space. If so, it’s time to consider your options along with these nine advantages:
1. Establishing a permanent location. If your business is heavily location-dependent and you find a property that’s a perfect match for visibility, foot traffic, proximity to loyal customers, etc., you may not want to miss out on owning it.
2. Equity and appreciation: When you own commercial real estate, you gain equity with your down payment and build it up as you pay down the mortgage. Your property value is also highly likely to appreciate over time.
3. Fixed overhead: Lease costs are less predictable than a mortgage. Lease rates can rise with changing real estate values, demand, and improvements made to the property.
4. Flexibility for modifications: Leased property may hold you back from customizing a space to your exact needs. If you own the space, you’ll have more freedom to make renovations, improvements, and possibly expand as your needs grow.
5. More control/freedom from poor landlords: Landlords are primarily concerned about maximizing revenue which can lead to poor maintenance or any capital improvements. As an owner, you can finally have the quality and security you demand from your business space.
6. Income from tenants: If you buy a space with room for tenants, you can create a second stream of income.
7. Collateral: Real estate is an asset that you can use as collateral for future equity financing needs.
8. Tax benefits: You may be able to deduct mortgage interest, property taxes, depreciation, and certain expenses related to maintaining and managing your own property. Talk to your tax professional to learn about tax benefits applicable to your specific situation.
9. Long-term investment: Real estate prices are historically less volatile than the stock market and provide tangible value. As a long-term investment, it’s a smart way to diversify your portfolio and potentially gain a hedge against inflation. If you add rental income to your property’s appreciation, your return over time can be especially profitable.
There are obviously several other important factors that go into choosing to own a property. Leasing removes certain maintenance costs and gives you the flexibility to easily relocate. That’s why it’s always smart to consult with a real estate professional and financial advisor to help you make an informed decision.
About Apex Commercial Capital: We are a full-service lender focused on providing commercial mortgages and equipment financing to small businesses. We understand that the borrower is more than a credit score – we consider all the relevant financial information when reviewing a loan request, looking beyond the numbers to understand each business owner's objectives in determining how we can best work together to achieve them. Call (800) 262-APEX today to talk with our team of small business mortgage specialists.